Uniform Metrics Could Speed HRO Deals

One of the main challenges that a company the size of Arinso faces in the HRO market is how to handle those prospective buyers who require a lot of education.

Too often, these employers require months and months of discussions and education before they can even decide what they need from an HRO provider, says Rudy Vandenberghe, executive director at Arinso.

"Sometimes we don’t participate in a request for proposal because we know it will be a nine-month sales cycle just to discuss each item," he says. "We just can’t afford to do that."

But now Houston-based outsourcing advisor Equa¬Terra, along with Accenture HR Services, SAP and Arinso, may have devised a solution to buyers’ troubles.

A working group set up by the four companies has created a way to standardize a statement of work—the outline that is the basis of an outsourcing agreement. By agreeing on standards for the metrics to be used in a service level agreement, buyers would be able to see the pricing and performance indicators for each of the prospective providers on a single sheet of paper.

"Currently, all providers have different definitions for the same thing, and it’s hard for buyers to know what they are talking about," EquaTerra chairman Mark Hodges says.

By having all the parties agree in advance on standards, an outsourcing advisor like EquaTerra wouldn’t have to explain what each provider does. "The buyer can just look at a form and see it," Hodges says.

If successful, the project would cut the sales costs for HRO providers by reducing the sales-cycle time, Vandenberghe says.

It also makes the pricing clearer for buyers. In recruiting, buyers can see how much each provider charges per hire, per month, for different levels of employees, Hodges says. EquaTerra hopes to bring more providers into the group and have a client try out the program in the next few months.

The working group doesn’t hold lofty hopes that all buyers are going to want to use the system.

"I am supportive of this initiative in that I think it will be good to educate clients," says Christian Marchetti, managing director in the Paris office of Accenture HR Services. "But I don’t believe this is a standard that the whole industry should apply."

The group is targeting middle-market clients, or those employers with 3,000 to 15,000 employees, to use the service. "Bigger employers will want more customization," Hodges says.

However, Hodges admits it might be a challenge to get even some midmarket clients on board. "They may see it and say, ‘But can I tweak this or that?’ " he says. "But this is the direction more of the industry is going."